FocusUS expandable polystyrene demand may worsen in Q4

29 September 2009 19:38  [Source: ICIS news]

By George Martin

HOUSTON (ICIS news)--The prospects for packaging in the US expandable polystyrene (EPS) industry remained grim with the economy still in the doldrums, high unemployment, consumer fears and low demand, a plastics transformer said on Tuesday.

Talk of another "black Christmas" at the retail level has begun, and the usual inventory build at this time for packaged goods was weak, the transformer added.

Construction demand in some parts of the country appeared to be stronger, but new business was still being stymied by banks still not lending as before, the source said. 

Government stimulus spending was underway, but the bulk of those projects will hit in 2010, according to news reports. In the meantime, the prospects for the fourth quarter of 2009 were dim, the source said.

Transformer companies reported that business ranged from flat to off by 40% relative to the low levels seen last year. Some estimated that business was down to about one half of last year.

A large transformer in Mexico also saw a very light work load, and had eliminated one work shift to match its manpower to the existing weak demand. October demand was not promising, the transformer said.

US producers have reduced production rates and increased prices to keep up with rising raw materials costs. But this also provided an umbrella for the offshore suppliers who were regaining market share without having to drastically cut their prices.

The problem for all resin suppliers was a lack of forward demand by the transformers. Until demand picks up, attempts to raise prices would be met with resistance or ignored by the transformers, another transformer said.

With benzene and styrene monomer prices heading back down, the likelihood of EPS price reductions in October was increasing.

Another possibility is that October prices would be flat because the increases announced for September did not take hold with many buyers.

The initial announcement called for a 5 cent/lb ($110/tonne, €75/tonne) increase in September that was later reduced to 3 cents/lb by all producers. However, many transformers had yet to see any increase.

Many decided early on not to buy during September. The weak demand has allowed them to stretch their resin stocks while waiting for lower prices ahead.

US producers acknowledged that volumes had suffered in September and they were preparing for a tough fourth quarter. “If all we lose in October is the September gains, that will be a blessing,” a producer said.

EPS prices in the US were in the range of 74-80 cents/lb DEL (delivered) for block material, and about 5 cents/lb higher in Mexico, according to global chemical market intelligence service ICIS pricing.

North American producers include NOVA Chemicals, Flint-Hill Resources, StyroChem, Nexkemia, BASF, Polioles and Polidesa, with the last three based in Mexico.

$1 = €0.68

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By: George Martin
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